Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296032 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 10943
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Socio-economic differences in longevity have fuelled a debate whether pension systems have a regressive bias favouring groups with a high life expectancy. We show that the distributional implications of such pooling depend critically on the benefit profile across age/time, which in turn is determined by how benefits are indexed to prices and wages. Choosing indexation scheme involves a choice between a low initial benefit with an increasing profile and a high initial benefit with a flat/decreasing profile, where the former benefits groups with a high life expectancy, and vice versa. We analyse how indexation affects the trade-off between insurance and distribution when groups with different mortality are separated or pooled, and the optimal benefit profile under both standard preferences and temporal risk aversion wrt. the length of life.
Subjects: 
annuities
differential mortality
distribution
indexation
JEL: 
D14
G22
H55
J18
Document Type: 
Working Paper
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